Mortgage glossary
Plain-language definitions of the terms you'll come across during your mortgage journey.
The total length of time it will take to pay off your mortgage in full, typically 25 to 30 years, spread across a series of shorter renewable terms.
The length of your current mortgage contract — commonly 1 to 5 years — after which you renew or renegotiate, even if your amortization period continues.
The size of your mortgage compared to the value of your home, expressed as a percentage. A $360,000 mortgage on a $450,000 home is an 80% LTV.
Mortgage default insurance, required when your down payment is less than 20% of the purchase price. The premium is added to your mortgage balance.
A federal requirement that qualifies you at your contract rate plus 2%, or a set minimum rate — whichever is higher — to confirm you could handle a payment increase.
Gross Debt Service and Total Debt Service ratios compare your housing costs (and total debts) to your income, used by lenders to determine how much you can borrow.
A fixed rate stays the same for your entire term. A variable rate moves with the lender's prime rate, which can raise or lower your payment or interest portion over time.
A short-term loan that covers the gap when the closing date on your new home falls before the sale of your current home closes.
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